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Fake private lenders
@Tania Ninerell scam, lenders do not send the money directly to you, they wire to the closing attorney or title company.
@Tania Ninerell Ask him this! If he truly is a lender! Tell him you want to do a reverse wire transfer. That should flush him out! or you can simply set up a DBA business account for him to wire you the money! Irregardless if you sign an agreement if the money doesn't show up you don't owe a dime, but you keep him away from your personal accounts!
Thank you so much for the feedback. I did not know how the process worked. I was going to open up another account just for this lender. However, now I know it's a scam.
Originally posted by @Tania Ninerell:
I am new to real estate. I found a private lender. He is willing to give me 100% with 3% interest on a $150 k loan. He said he needs my bank account to deposit the money. Does this like a scam or is it legit? How does one know? I don't know how it works. I would appreciate feedback.
@Tania Ninerell this si 100 % scam run from folks like these. First no one is lending at 3 % and no one lends directly to your account. Please take a minute to read more about hard money and private loans. Even here on this sight should give you a better idea of what folks who at actual lenders are doing.
Alex
Again thank you for the feedback. Btw, I was never going to give him my bank account number to my personal money. It seems scams are abundant. Thank god for this website!
Go to your bigger local real estate investor meetings. Some lenders will be sponsors for the meeting. Go to them and do a deal with them. Ask people at the meeting if they have used them before. When there is a lender that several people have used AND have had good experiences with them, that is the company to use.
You might talk with someone in person who has done a few deals and ask them questions about how the whole purchasing and selling works.
@Tania Ninerell just to give you some more info. The way it works is you submit your deal to us, we review it, and offer you terms based on that. Now 100% financing seems a bit farfetched and unrealistic, especially if you have single digit flips or buy & holds to your name and the source isn't a family member or close friend. Most private lenders or non-bank lenders require you to put anywhere from 15% - 25%. Again, especially for newer investors, there is a lot more risk associated from the lender's perspective, so putting 100% financing up really is not possible or prudent.
Also, the only fee you may incur at the beginning of obtaining financing is an application fee. This usually is a low amount and allows the lender to pay third party's to take your loan through underwriting. You sign a term sheet and pay the application fee. Then you go through underwriting where the lender will ask you to fill out documents, supply documents, and send you certain disclosures that they are required to by state & federal law/regulations.
When you're ready to go to closing, you will be issued a final settlement statement, where all the charges and fees are there for you to review. You will see the title company's charges and your lenders. At closing, you will pay the percent or dollar amount that the lender requires to originate or make your loan, this is known as the origination fee.
So the fees to be aware on the lender's side from the start, meaning before you sign anything or pay anything, are the lender's application fee (ask whether or not it's refundable), the origination fee (should be paid at closing), and any other fees you will be responsible for or charged for (appraisal, lender's legal fees, and any miscellaneous fees).
100% finance should not be made available to anyone who is considered new or inexperienced. It really is true that if it feels or seems too good to be true, it almost always is. You have to follow your gut and instincts. Whatever voice or feeling inside you that lead you to ask this question was correct. Remember that and have it lead. Sometimes will it make you paranoid or overtly cautious, perhaps, but you can never fault yourself for listening to your intuition. You can fault yourself for not taking the time to learn about something, educate yourself on a topic, or throw caution to the wind.
Another red flag is if they ask for funds up front for the application.